The use of interval arithmetic in solving a non-linear rational expectation based multiperiod output-inflation process model: The case of the IN/GB method

Benito A. Stradi-Granados and Emmanuel Haven

European Journal of Operational Research, 2010, vol. 203, issue 1, 222-229

Abstract: The use of interval mathematics to solve non-linear problems is an attractive alternative to traditional real-number techniques. It was demonstrated in a previous paper [Stradi, B., Haven, E., 2005. Optimal investment strategy via interval arithmetic. International Journal of Theoretical and Applied Finance 8(2), 185-205] that interval arithmetic in the form of the Interval-Newton Generalized Bisection (IN/GB) method is effective in solving highly non-linear problems. In this paper we solve a rational expectations models with the help of the IN/GB method. This method is capable of (i) rapidly eliminating no solution sections of the multidimensional space and (ii) concentrate computational efforts on those areas of multidimensional space where there may be a solution.

Keywords: Interval; arithmetic; Interval; Gauss-Seidel; method; IN/GB; method; Rational; expectations; Forward-looking; macroeconomics; models (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:203:y:2010:i:1:p:222-229

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